On the 16th August, Irish television screens were occupied by the buzz of Leaving Certificate students receiving their CAO offers. Now, this month, many of them are enjoying their first taste of college life. For many younger children looking on this is something exciting to aspire for. For parents, it’s a reminder of those expensive college fees!
How do you plan on saving up to €50,000?
Currently, the maximum fee for third level education for Irish students is €3,000 per year. Include sundry expenses such as travel, books, food, mobile charges, social life, etc. and it is clear that €3,000 is only a starting figure. According to a DIT survey, the actual cost of going to college, if your child will have to rent accommodation and including all sundry expenses, can amount to €11,766 per year (renting outside of Dublin) or €12,495 per year (renting in Dublin). Therefore, for four years of college this could add up to as much as €50,000. The question is, how are you planning to save for your child’s college education?
What about saving with the post office?
For many Irish people, deposit accounts or post office saving accounts are the preferred option in these circumstances. This is for two reasons; 1) no volatility and 2) easy access to funds if necessary.
Why we would advise against this option
However, for significant savings such as this, the deposit account has little to no ROI. Deposit interest rates are extremely low, often only amounting to 0.5%. Considering the charges required to keep such accounts open, someone saving via this method could actually experience a leakage from what they are saving. The main advantage of the deposit account continues to be the easy access to funds. However, different savings account providers have assessed this system and come up with an attractive alternative – easy access saving bonds.
The answer: easy access saving bonds
Rather than your money sitting idle in a bank account, easy access savings bonds are designed to always be working for you. This is a long-term investment plan option, usually for a minimum of five years. There are many advantages to this type of saving.
Free access to your savings
Easy access saving bonds have no encashment penalties. Similar to the advantage of a deposit account, you can make withdrawals from your savings any time and without being financially penalised for it.
Much higher ROI
By investing in a managed fund such as this, you can expect an estimate return of 7%. In comparison to the post office alternative where you are probably experiencing a 0% return, or even a leakage from your savings, this is a very distinct advantage for easy access savings bonds.
Positive from the very beginning
Often there is an allocation rate that varies depending on the provider. For example, at Zurich insurance they have an allocation rate of 101%, which means for every €100 you put into your fund, Zurich provides an incentive of €1 to be added to it.
A long-term investment
For someone saving for their children’s third level education, this will more often than not consist of a long-term investment. Easy access saving bonds are better suited to investments stretching over a minimum of 5 years. The reason for this is because your invested money is used to buy units in a particular fund, which convert into shares in expanding sectors, such as a technology company, a pharmaceutical company, etc. This means that for the short term this type of investment can be rather volatile, but in the long-term the return in investment can be very substantial. Nonetheless, in an easy access savings bond you can withdraw from your savings at any time you wish.
Free expert financial advice
The best way to understand what type of savings bond you should invest in and whether it is the right solution for you, is to have your particular individual situation accessed by a professional. Receiving advice from a financial expert, who specialises in this kind of investment, is not only highly recommended, but it is free! Many financial advisors affiliated with insurance companies who sell easy access savings bonds are provided with commission to market this product. This means that there is valuable financial advice freely available to you right now, with regards to what kind of savings bond you should invest in, how much you should invest, how regularly you should be making contributions, how high risk it will be, how long you will invest for, etc.
Shop around for the best investment opportunity
These financial advisors will provide you with information about multiple insurance companies. This kind of detailed comparison of many investment opportunities will help you decide which one is the best provider for you. Here you have the freedom to ‘shop around’ before approaching any insurance company directly. If you are considering saving for your children’s education with an easy access savings bond or would simply like more information, Beyond’s financial investment experts can offer free advice on this very subject.